Insurance markets provide a clear example. Individuals hedge against catastrophic health events not because they can place a perfect dollar value on their life but because they understand the impact such events have on consumption over time. There is a rational allocation at play even if the language surrounding the motivation often leans moral or emotional.
The power of price theory here is in stripping away the belief that absence of a market price means absence of valuation. Actions priorities and allocations reveal our willingness to pay whether that willingness is in dollars in time or in forgone alternatives. The discomfort comes from confronting those implicit valuations directly but confronting them is essential if we are to craft policies that manage scarce resources with clarity and honesty.
Insurance markets provide a clear example. Individuals hedge against catastrophic health events not because they can place a perfect dollar value on their life but because they understand the impact such events have on consumption over time. There is a rational allocation at play even if the language surrounding the motivation often leans moral or emotional.
The power of price theory here is in stripping away the belief that absence of a market price means absence of valuation. Actions priorities and allocations reveal our willingness to pay whether that willingness is in dollars in time or in forgone alternatives. The discomfort comes from confronting those implicit valuations directly but confronting them is essential if we are to craft policies that manage scarce resources with clarity and honesty.